What is FINRA arbitration?

FINRA arbitration is a method of resolving disputes between investors and brokerage firms or financial advisors outside the court system. It involves a neutral third party, an arbitrator, who reviews the case and makes a binding decision.

Why choose arbitration over litigation?

Arbitration is typically faster, less formal, and more cost-effective than litigation. It also provides a final resolution to disputes, with limited grounds for appeal. Most relationships with financial advisors are formalized by entering into a contract which contains a dispute resolution clause. Nationally, most dispute resolution clauses provide for FINRA arbitration.

Who can file a FINRA arbitration claim?

Investors, brokerage firms, and financial advisors can file a FINRA arbitration claim if they have a dispute related to securities or investment activities. FINRA arbitration is normally the forum for disputes among registered persons, brokerage firms and the public customer clients of the firms.

How do I start the FINRA arbitration process?

To start the arbitration process, Bakhtiari & Harrison will file a Statement of Claim with FINRA, detailing the nature of the dispute, the parties involved, and the relief sought.

What is a Statement of Claim?

A Statement of Claim is a written document submitted by the claimant outlining the facts of the dispute, legal claims, and the desired outcome.

What happens after filing the Statement of Claim?

After filing, the respondent has 45 days to answer the Statement of Claim. The answer must address the claims and may include counterclaims or other relief sought.

What fees are involved in FINRA arbitration?

Fees include filing fees, hearing session fees, and possibly member surcharges or process fees, depending on the specifics of the case.

Can I represent myself in FINRA arbitration?

Yes, you can represent yourself, but many choose to hire an attorney with experience in securities arbitration due to the complexity of the process. Investors and industry professionals who choose to represent themselves do so at a substantial disadvantage, Wall Street firms typically retain experienced professional counsel to represent their interests.

How are arbitrators selected?

Arbitrators are selected through the Neutral List Selection System (NLSS), which provides a list of potential arbitrators. Both parties rank and strike names to agree on a panel.

What qualifications do FINRA arbitrators have?

FINRA arbitrators include attorneys, accountants, financial professionals, and public members who have undergone training and meet FINRA’s qualification standards.

How long does the arbitration process take?

The process typically takes 12-18 months from filing to the final award, but this can vary based on case complexity and scheduling. Preference may be given to investors that are seriously ill or elderly.

What is a prehearing conference?

A prehearing conference is a meeting between the parties and the arbitrators to discuss procedural issues, set a schedule, and address preliminary matters including final FINRA arbitration hearing dates.

What is discovery in arbitration?

Discovery is the exchange of documents and information between the parties to prepare for the hearing. It is more limited than in litigation.

What happens during the arbitration hearing?

During the hearing, both sides present evidence, call witnesses, and make arguments. The arbitrators then deliberate and render a decision.

Is the arbitration hearing open to the public?

No, arbitration hearings are private and confidential. Only the parties, their representatives, and the arbitrators may attend.

Can I settle my case before the hearing?

Yes, parties can settle at any time before the arbitrators render a decision, often through negotiation or mediation.

What is mediation in the context of FINRA arbitration?

Mediation is a voluntary process where a neutral mediator helps the parties negotiate a settlement. It is separate from arbitration and non-binding.

What happens if I lose in arbitration?

If you lose, the arbitrator’s decision is final and binding. There are limited grounds for challenging the award in court.

Can I appeal an arbitration decision?

Generally, you cannot appeal an arbitration decision. However, you can seek to vacate the award on very narrow grounds, such as arbitrator misconduct.

What types of disputes are resolved through FINRA arbitration?

Disputes include claims of fraud, breach of fiduciary duty, negligence, breach of contract, and other issues related to securities and investments.

How are damages determined in arbitration?

Damages are determined based on the evidence presented, including financial records, expert testimony, and the specifics of the case.

Can arbitrators award attorney’s fees?

Arbitrators can award attorney’s fees if provided for by law, contract, or if both parties request it.

How do I enforce an arbitration award?

An arbitration award can be enforced in court through a confirmation process, making it a judgment that can be collected.

What is expungement in FINRA arbitration?

Expungement is the process of removing information from a broker’s record on the Central Registration Depository (CRD) system. It is only granted under specific conditions.

What are the grounds for vacating an arbitration award?

Grounds for vacating an award include arbitrator bias, fraud, corruption, or misconduct, as well as exceeding their powers.

Are arbitration awards public?

Yes, arbitration awards are published on FINRA’s website, providing transparency and access to past decisions.

What is the role of the Office of Dispute Resolution?

The Office of Dispute Resolution administers arbitration and mediation cases, ensuring that the process runs smoothly and efficiently.

What is a Simplified Arbitration?

Simplified Arbitration is for cases involving claims of $50,000 or less, allowing for a quicker and less expensive resolution without a hearing.

Can I request an expedited hearing?

Yes, in certain circumstances, such as elderly or seriously ill parties, you can request an expedited hearing.

What is the role of an arbitrator?

An arbitrator acts as a neutral decision-maker, reviewing evidence, hearing testimony, and issuing a binding decision on the dispute.

How do I prepare for an arbitration hearing?

Preparation involves gathering evidence, preparing witnesses, and developing a clear case strategy to present to the arbitrators.

What types of evidence are admissible in arbitration?

Evidence can include documents, emails, financial records, expert reports, and witness testimony, subject to the arbitrators’ discretion.

Can I request documents from the other party?

Yes, through the discovery process, you can request relevant documents and information from the other party to support your case.

How does FINRA handle conflicts of interest with arbitrators?

FINRA requires arbitrators to disclose any potential conflicts of interest, and parties can object to arbitrators they believe are biased.

What happens if a party does not comply with discovery?

If a party does not comply, the other party can file a motion to compel, asking the arbitrators to order compliance and possibly impose sanctions.

What is a motion in arbitration?

A motion is a formal request for the arbitrators to make a ruling on a specific issue, such as compelling discovery or dismissing a claim.

Can I request interim relief in arbitration?

Yes, you can request interim relief, such as temporary restraining orders or injunctions, to preserve the status quo pending the final decision.

How are hearing locations determined?

Hearing locations are typically determined by the location of the claimant unless both parties agree to a different venue.

What is a telephonic or virtual hearing?

Telephonic or virtual hearings are conducted via phone or video conference, allowing parties to participate remotely.

How are arbitration awards paid?

Awards are typically paid by the losing party within 30 days of the decision, unless otherwise specified by the arbitrators.

What if the losing party does not pay the award?

If the losing party does not pay, you can seek enforcement through the courts, turning the award into a legally enforceable judgment.

Are there any limits on the types of claims I can bring in arbitration?

FINRA arbitration covers a broad range of claims related to securities, but there are some statutory and regulatory limits on certain types of claims.

Can I bring a class action in FINRA arbitration?

No, class actions are not permitted in FINRA arbitration. However, you can join other claimants in a single arbitration if the claims are similar.

What is the role of expert witnesses in arbitration?

Expert witnesses can provide specialized knowledge and opinions to help explain complex financial issues to the arbitrators.

How are hearing dates scheduled?

Hearing dates are scheduled based on availability of the parties and arbitrators, with consideration for the complexity of the case.

Can I request a different arbitrator if I believe one is biased?

Yes, you can challenge an arbitrator if you believe they have a conflict of interest or bias that affects their impartiality.

What is a “chairperson” in a FINRA arbitration panel?

The chairperson is the lead arbitrator who manages the procedural aspects of the case and ensures the hearing runs smoothly.

How does FINRA ensure fairness in arbitration?

FINRA has rules and procedures in place to ensure a fair and impartial process, including arbitrator training and disclosure requirements.

How do I learn more about the FINRA arbitration process?

For more information, you can visit FINRA’s website, contact their Office of Dispute Resolution, or consult with experienced attorneys like those at Bakhtiari & Harrison.

How can Bakhtiari & Harrison help with FINRA arbitration?

Bakhtiari & Harrison can assist with filing claims, responding, selecting arbitrators, discovery, hearings, and ensuring the best possible outcome through skilled representation and strategic advice.

Summit Brokerage Services Investment Lawyer

Summit Brokerage Services, Inc., headquartered in Boca Raton, Florida, was an independent broker-dealer and registered investment adviser (RIA) before being acquired by Cetera Financial Group. The firm provided financial advisors with investment solutions, wealth management tools, and business development support. This review examines Summit Brokerage Services’ history, regulatory profile, and key business metrics, with a focus on compliance and client relations.

History of Summit Brokerage Services

Founded in 1993, Summit Brokerage Services was established to offer financial advisors a platform emphasizing independence, innovation, and client-focused solutions. Over the years, the firm expanded its network and service offerings, catering to a diverse range of advisors and clients. In 2017, Summit Brokerage Services was acquired by Cetera Financial Group, and its operations were fully integrated into the Cetera network.

Key Business Metrics

CRD Number

Summit Brokerage Services was registered under CRD number 34643. Regulatory bodies used this identifier to monitor the firm’s compliance and registration history.

Number of Regulatory Events

According to FINRA BrokerCheck, Summit Brokerage Services was involved in multiple regulatory events. These incidents primarily involved supervisory deficiencies, disclosure issues, and compliance violations, highlighting areas where the firm worked to strengthen oversight mechanisms before its acquisition.

Number of Employees

Before its acquisition, the firm employed approximately 400 professionals who provided operational, compliance, and administrative support to its network of financial advisors.

Assets Under Management (AUM)

At its peak, Summit Brokerage Services oversaw approximately $18 billion in assets under management (AUM), demonstrating its ability to attract and retain a substantial client base.

Revenue

The firm generated approximately $250 million annually through brokerage, advisory, and wealth management services before being acquired by Cetera Financial Group.

Regulatory and Compliance Landscape

Summit Brokerage Services operated under the oversight of the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC). While the firm took measures to enhance its compliance framework, its regulatory history included areas requiring continued attention.

Notable Regulatory Issues

Summit Brokerage Services faced several regulatory actions, including:

Supervisory Deficiencies: The firm was cited for failing to adequately supervise representatives, particularly concerning the sale of complex investment products.
Disclosure Deficiencies: Regulatory findings identified cases where the firm failed to provide full transparency on fees and conflicts of interest.
Fines and Settlements: Summit Brokerage Services paid fines related to compliance violations, underscoring the need for improved internal controls.

These challenges contributed to the firm’s decision to join Cetera Financial Group, which took over its advisor network and business operations.

Customer Complaints

Customer complaints against Summit Brokerage Services often involved allegations of unsuitable investment recommendations, undisclosed fees, and inadequate communication.

Alternative Investments: Many complaints pertained to high-risk investment products that were not fully explained to clients.
Fee Transparency: Some clients expressed concerns over unclear fee structures, leading to disputes and dissatisfaction.

The firm worked to resolve these issues through arbitration and mediation, but its compliance failures ultimately impacted its reputation and led to its acquisition.

Advisor Support and Client Services

Before its acquisition, Summit Brokerage Services provided financial advisors with access to financial planning tools, technology platforms, and compliance support. However, its regulatory history suggested significant gaps in oversight and risk management.

Clients benefited from a broad range of investment products and financial planning services, but compliance and transparency concerns remained areas for improvement.

Customer Experience and Reputation

Summit Brokerage Services built a strong network of advisors and clients, but its reputation suffered due to regulatory issues and customer complaints. The firm’s integration into Cetera Financial Group was aimed at strengthening compliance, risk management, and overall client experience.

Looking Ahead

Since the acquisition, former Summit Brokerage Services advisors and clients have transitioned to Cetera Financial Group’s platform. The acquisition was intended to address compliance weaknesses and provide a more stable operating environment for advisors and clients alike.

Final Thoughts

Summit Brokerage Services was once a major player in the independent broker-dealer space, but its regulatory challenges and business model led to its acquisition by Cetera Financial Group. While the firm provided valuable resources and investment opportunities, its compliance history underscores the importance of strong supervision and risk management. Advisors and clients who were once affiliated with Summit should now look to Cetera Financial Group for ongoing financial services and support.

For more information, contact Bakhtiari & Harrison.